February 3, 2022

Sneak Peek: Changes to Your TSP and a New Investment “Window”

Did you know that the Thrift Saving Plan is about to change? 2022 is poised to bring about significant adjustments for federal employees. While the new rollout isn’t ready yet, the latest reporting has these changes coming your way midway through 2022. TSP updates are still several months off, but it’s never too early to plan. Here’s what we know so far.

The New Mutual Fund Window

As a current TSP holder, you’re probably well aware of the limited investing options you have in this fund. Right now, there are just five options: 

  • C fund: An S&P 500 index fund 
  • S fund: A total U.S. stock market index fund
  • I fund: An international stock index fund 
  • F fund: A broad U.S. bond index fund
  • G fund: A short-term bond index fund

You can also choose from a series of L funds that automatically allocate your money among the above five funds and reduce your risk as you age. These funds are tied to the anticipated decade of your retirement (2030, 2040, 2050, and so on). More information can be found on these options at the TSP website www.tsp.gov/funds-individual/.

But later this year, the TSP will add a new mutual fund window, which is expected to offer 5,000 new mutual fund investment options for TSP investors. This is an enormous change, and one with the potential to provide investors exponentially more freedom to invest as they see fit. 

For example, it’s expected that many of these new mutual funds will provide ESG (environmental, social, governance) offerings to investors. These funds are built to help investors make socially conscious choices with their money (i.e. avoiding fossil fuels and the like). 

But there is an important caveat here. More choice also means more risk, and actively managed mutual funds tend to be more volatile than index funds like the ones currently available in the TSP. That’s because index funds are designed to mirror the market overall, while other mutual funds actively try to time the market for bigger returns. If you find yourself uncertain about your new options, it’s best to consult with an expert. 

What We Don’t Know Yet: It’s not yet clear whether there will be any limits on the dollar amount or percentage of investments that can go toward this new window, or if there would be any additional fees for the new investment options. 

New Management of Old Funds

There are also investment management changes coming to the old fashioned TSP funds as well. Instead of being managed by a single company, the C, S, I, and F funds will now have a primary and secondary manager. BlackRock will take charge of 80% of these funds assets, while State Street will be responsible for the other 20%. This is to reduce risk across the board. 

It’s important to note that in this case, risk isn’t to the money in the fund, but is more about operations. For example, if one company experienced downtime or delays that took them off line for a few days, TSP investors wouldn’t be left entirely in the lurch. This is all pretty deep into the inner workings of the TSP, and the average investor would never notice this change.

Modern Upgrades and Features

Finally, the changes to the TSP are designed to bring service into the twenty-first century. Here are some of the features expected to launch this year, thanks to a new vendor coming on board:

  • A mobile app for smartphones
  • Customer service online chat
  • Virtual assistant powered by AI
  • Online forms
  • Electronic signatures
  • Concierge service for common issues
  • Increased security and fraud protection
  • Biometric data (thumbprints and facial recognition) to log in
  • Updated record keeping

Any time your retirement savings plans change, it’s a good time to review your investments to make sure they’re working for you. Whether you’re wondering how to pick the best new mutual funds or need help developing an investment strategy that balances risk and reward, we can help. Get in touch for help with your federal retirement benefits today.